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Chapter 01- Managerial Accounting Practice Materials
Accounting
University of Manila
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CHAPTER 1
MANAGERIAL ACCOUNTING
SUMMARY OF QUESTION TYPES BY LEARNING OBJECTIVE,
BLOOM’S TAXONOMY, LEVEL OF DIFFICULTY, AACSB CODES, AND
CPA CODES
Item LOBT LOD AACSB CPA Item LOBT LOD AACSB CPA ItemLO BT LOD AACSB CPA True-False Statements
- 1 C E AN MA 3. 2 K E AN MA 5. 4 K E AN MA
- 1 C E AN MA 4. 2 K E AN MA Multiple Choice Questions
- 1 K M AN MA 33. 2 C E AN MA 60. 4 K E AN MA
- 1 K E AN MA 34. 2 K E AN MA 61. 4 K E AN MA
- 1 K E AN MA 35. 2 C E AN MA 62. 4 C E AN MA
- 1 C E AN MA 36. 2 K E AN MA 63. 4 C E AN MA
- 1 K E AN MA 37. 2 K E AN MA 64. 4 K E AN MA
- 1 C E AN MA 38. 3 C M E MA 65. 4 K E AN MA
- 2 K E AN MA 39. 3 K E E MA 66. 4 C E AN MA
- 2 C E AN MA 40. 3 C M E MA 67. 4 C E AN MA
- 2 K E AN MA 41. 3 K E AN MA 68. 4 K E AN MA
- 2 C E AN MA 42. 3 K E AN MA 69. 4 K E AN MA
- 2 C E AN MA 43. 3 K E AN MA 70. 4 K E AN MA
- 2 K E AN MA 44. 3 K E AN MA 71. 4 C E AN MA
- 2 K E AN MA 45. 3 C E AN MA 72. 4 K E AN MA
- 2 K E AN MA 46. 3 K E AN MA 73. 4 C M AN MA
- 2 C E AN MA 47. 3 K E AN MA 74. 4 C E AN MA
- 2 K E AN MA 48. 3 C E AN MA 75. 4 C E AN MA
- 2 K E AN MA 49. 3 C E AN MA 76. 4 AN M AN MA
- 2 K E AN MA 50. 3 K M AN MA 77. 4 K E AN MA
- 2 K E AN MA 51. 4 K M AN MA 78. 4 K E AN MA
- 2 K E AN MA 52. 4 K M AN MA 79. 4 C E AN MA
- 2 K E AN MA 53. 4 K E AN MA 80. 4 K E AN MA
- 1 K E AN MA 54. 4 K E AN MA 81. 4 K E AN MA
- 2 K E AN MA 55. 4 K E AN MA 82. 4 K E AN MA
- 2 K E AN MA 56. 4 C E AN MA 83. 4 K E AN MA
- 2 K E AN MA 57. 4 C E AN MA 84. 4 K E AN MA
- 2 C E AN MA 58. 4 C E AN MA
- 2 K E AN MA 59. 4 K E AN MA
Bloom’s: AN = Analysis C = Comprehension K = Knowledge LOD: E = Easy M = Medium H = Hard AACSB: AN = Analytic E = Ethics CPA: MA = Management Accounting
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SUMMARY OF QUESTION TYPES BY LEARNING OBJECTIVE,
BLOOM’S TAXONOMY, LEVEL OF DIFFICULTY, AACSB CODES, AND
CPA CODES (CONT’D)
Item LO BT LODAACSBCPA Item LO BT LODAACSBCPA Item LO BT LODAACSBCPA Brief Exercises 85. 1 C M AN MA 88. 3 C M E MA 91. 4 C E AN MA 86. 2 C E AN MA 89. 3 C M E MA 92. 4 K E AN MA 87. 2 C E AN MA 90. 4 K E AN MA 93. 4 C M AN MA Exercises 94. 1 C E AN MA 98. 2 AN M AN MA 102. 3 C E AN MA 95. 1,2 AN M AN MA 99. 2 K E AN MA 103. 3 C E AN MA 96. 1,4 C E AN MA 100. 3 C E AN MA 104. 4 AN M AN MA 97. 2 C E AN MA 101. 3 AN M AN MA Completion Statements 105. 1 K E AN MA 107. 1 K E AN MA 109. 2 K E AN MA 106. 1 K E AN MA 108. 2 K E AN MA 110. 2 K E AN MA Matching 111. 4 K E AN MA Short-Answer Essay 112. 1 C E AN MA 113. 3 AN M AN MA
Bloom’s: AN = Analysis C = Comprehension K = Knowledge LOD: E = Easy M = Medium H = Hard AACSB: AN = Analytic E = Ethics CPA: MA = Management Accounting
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CHAPTER LEARNING OBJECTIVES
Explain the distinguishing features of managerial accounting. Managerial accounting is needed in all types of businesses—service, merchandising, and manufacturing. It also applies to all forms of business organization—proprietorships, partnerships, and corporations. Managerial accounting is needed in not-for-profit entities, as well as in profit-oriented enterprises. Managerial accounting provides tools that help management make decisions and evaluate the effectiveness of those decisions. The distinguishing features of managerial accounting are the primary users of reports—internal users, who are officers, department heads, managers, and supervisors in the company; the type and frequency of reports—internal reports that are issued as frequently as needed; the purpose of reports—to provide special-purpose information for a particular user for a specific decision; the content of reports—pertains to subunits of the business and may be very detailed and may extend beyond the double-entry accounting system; the reporting standard is relevant to the decision being made; and the verification of reports—no independent audits.
Identify the three broad functions of management and the role of management accountants in an organizational structure. The three functions are planning, directing, and controlling. Planning requires management to look ahead and to establish objectives. Directing involves coordinating a company’s diverse activities and human resources to produce a smoothly running operation. Controlling is the process of keeping the activities on track. Management accountants serve as staff members in an organization and play an important role in providing the required information for decision making.
Explain the importance of business ethics. All employees in an organization are expected to act ethically in their business activities. In Canada, the professional accounting organization promotes high standards of ethics in the accounting profession. These standards of ethics can be used as guidelines in dealing with the public and the organizations’ members. In the United States, the Institute of Management Accountants’ Statement of Ethical Professional Practice provides the codes of conduct regarding competence, confidentiality, integrity, and credibility. Moreover, companies are now evaluating their performance with regard to their corporate social responsibility.
Identify changes and trends in managerial accounting. Managerial accounting has experienced many changes in recent years. Among these are a shift toward meeting the needs of service companies and improving practices to better meet the needs of managers. Improved practices include a focus on managing the value chain through techniques such as just-in-time inventory and technological applications such as enterprise resource planning (ERP). In addition, techniques have been developed to improve decision making, such as the theory of constraints and activity-based costing (ABC). Finally, many companies now use the balanced scorecard in order to have a more comprehensive view of the company’s operations.
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In Canada, the accounting profession has recently been reorganized by the founding of CPA Canada (Chartered Professional Accountants of Canada) in 2013, into which the three legacy accounting bodies—Chartered Accountants (CA), Certified Management Accountants (CMA), and Certified General Accountants (CGA)—were merged.
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ANSWERS TO TRUE-FALSE STATEMENTS
Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. 1. F 2. F 3. F 4. T 5. T
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MULTIPLE CHOICE QUESTIONS
Managerial accounting a) information generally pertains to an entity as a whole and is very detailed. b) applies only to manufacturing companies. c) focuses primarily on reports for both internal and external users. d) provides tools that help management make decisions and evaluate the effectiveness of those decisions.
Reports scrutinized by managerial accountants a) do not include those focused on business subunits. b) do not include non-financial data relevant to business decision making. c) are highly aggregated. d) are special purpose for specific decisions.
Managerial accounting a) is concerned with costing products. b) is governed by generally accepted accounting principles. c) pertains to the entity as a whole and is highly aggregated. d) places emphasis on special-purpose information.
Managerial accounting information is generally prepared for a) stockholders. b) managers. c) regulatory agencies. d) investors.
Managerial accounting information a) pertains to the entity as a whole and is highly aggregated. b) must be prepared according to generally accepted accounting principles. c) pertains to subunits of the entity and may be very detailed. d) is prepared only once a year.
The major reporting standard for management accounting is a) the Standards of Ethical Conduct for Practitioners of Management Accounting and Financial Management. b) the Sarbanes-Oxley Act of 2002. c) relevance to decisions. d) generally accepted accounting principles.
Managerial accounting is also called a) inside reporting. b) cost accounting.
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Which of the following statements about internal reports is true? a) Most internal reports are summarized rather than detailed. b) Internal reports focus on general-purpose needs of users. c) The content of internal reports extends beyond the double-entry accounting system. d) Internal reports are often very general.
Which one of the following describes internal reports? a) They are often audited by CAs. b) They must be prepared according to GAAP. c) They are aggregated. d) They are detailed.
Which of the following reports would management find useful in decision making? a) monthly reports on activities to the Board of Directors b) quarterly reporting to the Toronto Stock Exchange c) specific purpose statements on services delivered d) audited financial information in the annual report to shareholders
How often should management receive or prepare reports on its internal process activities? a) on a fixed time basis b) as often as is necessary c) never more than monthly d) weekly
How often should management receive or prepare reports on its external business process activities? a) as they correspond to external financial reporting b) never more than monthly c) according to the company’s business cycle d) as often as is necessary
A company must inform readers of its annual report of a) all changes in financial accounting policies. b) results of any overseas activities. c) all changes in internal accounting information. d) changes to management’s bonus system.
How could management information assist in motivating its employees? a) keeping track of quality improvements b) showing the company’s percent of market share c) showing statistics on plant safety d) All areas would benefit from providing internal management information.
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In establishing a good internal reporting system, a company should a) ensure that these reports agree to generally accepted accounting principles. b) have the Board of Directors agree to the information provided. c) establish clearly understood standards of performance. d) All of the above are valid reasons.
What broad functions do the management of an organization perform? a) directing, manufacturing, and controlling b) planning, directing, and controlling c) planning, directing, and selling d) planning, manufacturing and controlling
Which one of the following involves coordinating a company’s activities to produce a smooth-running operation? a) auditing b) controlling c) planning d) directing
Which one of the following does the planning function involve? a) analyzing financial statements b) setting goals and objectives for an entity c) hiring the right people for a particular job d) coordinating the accounting information system
Which one of the following is true concerning the managerial function of controlling? a) It includes performance evaluation by management. b) It is concerned mainly with operating a manufacturing segment. c) It is performed only by the controller of a company. d) It includes hiring and training employees.
Which of the following represents two management functions? a) regulating and directing b) controlling and directing c) controlling and auditing d) auditing and planning
Which management function is a manager performing when objectives are being established? a) regulating b) planning c) motivating d) directing
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Corporate social responsibility only considers: a) profitability. b) sustainable business practices with regards to the environment. c) the triple bottom line including performance with regard to people, plant and profit. d) sustainable business practices with regards to employees.
Which of the following is true? a) Managerial accountants are the employees who are principally responsible for ethical behaviour. b) Investment losses have been precipitated by lax ethical standards. c) Corporate fraud was found to have decreased between the years 1998 and 2003. d) Expense account abuse has been cited as one of the rarest forms of unethical employee behaviour.
Choose the incorrect answer. a) While generally not encouraged, lapses in ethical behaviour are irrelevant to a company’s operating income. b) Proper incentives need to be implemented to foster an ethical business environment. c) Manufacturing companies need to establish effective and realistic production goals for their processes. d) As a result of the Sarbanes-Oxley Act, companies now pay more attention to the composition of the board of directors.
Which is the best definition of fraud? a) unknowingly misrepresenting the facts b) using business supplies for personal use c) the intentional misstatement of facts d) misappropriating funds for personal financial gain
Which of the following is true? a) Dissatisfied employees cite a decline in ethical behaviour is a result of a change in corporate culture. b) Unethical corporate behaviour occurs only in the United States because of its capitalistic environment. c) Unethical behaviour rarely causes a decline in investor confidence. d) Unethical actions are reasonable in an environment wherein unreasonable budgets and targets have been set.
The production manager at ABC Inc. is responsible for formulating the budget for his department. He will be evaluated on his ability to control costs. After considerable thought, he arrives at his best estimate of costs, and then adds a further 10% to the projections. Chances are he has inflated the cost projections because a) that is the way it has always been done. b) conservative accounting practise requires that he not under report expenses. c) by overestimating expenses, it will make it easier for him to come in under budget and
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receive a favourable evaluation. d) none of the above.
In Canada, which of the following professional accounting organizations play an important role in promoting high standards of ethics in the accounting profession? a) Chartered Professional Accountants of Canada (CPA Canada) b) The Financial Planning Standards Council (FPSC) c) The Canadian Institute of Financial Planning (CIFP) d) all of the above
The Ontario Securities Commission introduced regulations governing the composition and duties of audit committees, as well as their members’ behaviour. The new rules a) are as robust as parallel rules required by the U. Sarbanes-Oxley Act. b) were adopted by all provincial and territorial securities regulators, except for British Columbia’s. c) were introduced in conjunction with the Canadian Securities Administrators. d) all of the above.
A company acting ethically must adapt its external reports to any changes required a) instantly. b) as it is appropriate for its business cycle. c) as stipulated by the CPA Canada handbook and GAAP. d) if they are considered pertinent to its business activities.
A company acting ethically must adapt its internal reports to any changes required a) instantly. b) as it is appropriate for its business cycle. c) as stipulated by the CPA Canada handbook and GAAP. d) if they are considered pertinent to its business activities.
A recent survey of fraud by international accounting firm KPMG reported a) reported a 13% decrease in instances of corporate fraud compared with five years earlier. b) that employee fraud (such things as expense account abuse, payroll fraud, and theft of assets) represents 60% of all instances of fraud. c) financial reporting fraud (the intentional misstatement of financial reports) was the least costly to companies. d) business scandals with large investment losses and few employee layoffs.
The value chain a) is affected by technology through business-to-business on the Internet. b) refers to all the activities associated with providing a product with the exception of research and development. c) has not been enhanced by computerization and automation. d) refers to all the activities associated with providing a service with the exception of sales and marketing.
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d) to reduce inventory levels
In Canada the three different professional accounting designations that merged into CPA Canada are a) CPA, CA, CMA. b) CMA, CGA, CPA. c) CA, CMA, CGA. d) MA, CPA, CA.
Which of the following is a reason for the reorganization of the three accounting bodies in Canada into one, CPA Canada? a) There was conflict within the standard setting process between the three accounting bodies. b) Extensive competition between the three organizations was causing friction. c) The reorganization was mandated by the Canadian government. d) A larger unified profession would mean a more prominent and cohesive Canadian presence internationally.
Choose the correct statement. a) CGA stands for Certified Generic Accountant. b) CMA stands for Certified Managing Accountant. c) CA stands for Chartered Accountant. d) CPA stands for Certified Professional Accountant.
Which of the following statements is true? a) In recent decades, the Canadian economy in general has shifted toward an emphasis on providing services rather than goods. This trend has reduced the importance of managerial accounting. b) In recent decades, the Canadian economy in general has shifted toward an emphasis on providing goods rather than services. This trend has reduced the importance of managerial accounting. c) In recent decades, the Canadian economy in general has shifted toward an emphasis on providing services rather than goods. This trend has not reduced the importance of managerial accounting. d) In recent decades, the Canadian economy in general has shifted toward an emphasis on providing goods rather than services. This trend has not reduced the importance of managerial accounting.
Which of the following is an accounting question a service company may face? a) whether to purchase new equipment b) how much to charge for various services c) how efficient and productive individual staff members are d) all of the above
For a manufacturing company, the activities in the value chain would not include a) research and development.
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b) purchase of raw materials. c) customer relations. d) performance evaluation.
What term describes all activities associated with providing a product or service? a) the manufacturing chain b) the product chain c) the supply chain d) the value chain
How do most companies manage their value chain? a) by using activity-based costing b) by creating enterprise resource planning systems c) using an action plan d) using total-quality management systems
How have many companies significantly lowered inventory levels and costs? a) They use activity-based costing. b) They utilize an enterprise resource planning system. c) They have a just-in-time method. d) They focus on a total-quality management system.
Some companies implement systems to reduce defects in finished products with the goal of achieving zero defects. What are these systems called? a) activity-based costing systems b) enterprise resource planning systems c) value chain systems d) total-quality management systems
In order to obtain more accurate product costs, how do many companies allocate overhead? a) They use activity-based costing. b) They use enterprise resource planning systems. c) They use just-in-time methods. d) They use total-quality management systems.
Many companies now manufacture products that are untouched by human hands. What do they use to achieve this? a) activity-based costing b) computer-integrated manufacturing c) enterprise resource planning systems d) total-quality management systems
Which one of the following characteristics would likely be associated with a just-in-time inventory method?
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company’s goals. d) not applicable to service operations.
What is ERP? a) efficient resource procurement b) earnings reporting policies c) enterprise resource planning d) effective resource procurement
A balanced scorecard is a) a performance-measurement approach that uses both financial and non-financial measures to evaluate a company’s operations in an integrated way. b) a tool used to measure the benefits and costs of implementing a new strategy. c) used only by small organizations that cannot afford more expensive methods of evaluating their operations. d) focuses on non-financial measures in order to balance the many other financial reports companies use to evaluate their operations.
Which component of a company’s value chain would benefit most from internal management information? a) complaints from its customers over services offered b) bonuses paid to managers of the company c) the company’s efforts to develop new services d) All such components would benefit from internal management information.
Managerial accounting has become more important in service industries due to a) the decline of the manufacturing sector has freed up many accountants. b) service delivery is extremely complex and requires proper monitoring. c) the economy has become more service-oriented recently. d) the increase in complexity in computer systems requires accounting specialists.
The five steps in the lean thinking model, in order are: a) 1. Define value, 2. Identify the pull factors, 3. Identify the value stream, 4. Make the value stream flow, 5. Revise until perfection is achieved. b) 1. Define value, 2. Identify the value stream, 3. Make the value stream flow, 4. Implement a pull system, 5. Strive for perfection. c) 1. Identify unproductive activities that need to be reduced, 2. Identify push factors causing those unproductive activities, 3. Develop operations so that the work flows smoothly, 4. Strive for perfection, 5. Evaluate the value that has been added. d) 1. Identify push factors, 2. Develop strategies to turn those factors into pull factors, 3. Assess the value added by steps one and two, 4. Strive for perfection, 5. Repeat the process on a regular basis.
Step one in the lean thinking model requires a) target costing, that is determining the acceptable cost the customer is willing to pay.
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b) an assessment of the potential value that can be added to the firm by adopting the lean manufacturing concept. c) identifying processes that do not add value to the manufacturing process. d) identifying push factors that can be converted to pull factors.
- Step two in the lean thinking model a) deals with push and pull factors. b) is the central element in understanding how a company can evaluate what is value added and what is waste. c) is always the most time consuming. d) can be excluded if step one is done correctly.
Chapter 01- Managerial Accounting Practice Materials
Course: Accounting
University: University of Manila
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